00-003439BID Telecom Response, Inc. vs. Department Of Management Services Status: Closed Recommended Order on Thursday, December 14, 2000.

Summary: Bid protest award of telecommunication equipment contract to second lowest bidder. Lowest bidder, by percentage discount, found non-responsive. Bid awarded to sole responsive bidder single bid negotiated."

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

TELECOM RESPONSE, INC., )

)

Petitioner, )

)

vs. ) Case No. 00-3439BID

)

DEPARTMENT OF MANAGEMENT )

SERVICES, )

)

Respondent. )

__________________________________)

RECOMMENDED ORDER

Notice was given and on September 11, 2000 and September 19-

20, 2000, a final hearing was held in this case. Authority for

conducting the hearing is set forth in Sections 120.569 and

120.57(1)(3), Florida Statutes. The hearing location was the

Division of Administrative Hearings, the DeSoto Building,

1230 Apalachee Parkway, Tallahassee, Florida. The hearing was

conducted by Charles A. Stampelos, Administrative Law Judge.

APPEARANCES

For Petitioner: F. Alan Cummings, Esquire

Daniel Te Young, Esquire

Cummings & Snyder, P.A.

1004 DeSoto Park Drive

P.O. Box 589

Tallahassee, Florida 32302-0589

For Respondent: Terry A. Stepp, Esquire

Department of Management Services

4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950

STATEMENT OF THE ISSUES

Whether the Department of Management Services' (Department)

intent to award the contract pursuant to Invitation to Bid (ITB),

Bid Number 33-840-980-E, to Frebon International Corporation,

(FREBON), the second low bidder by price discount, and to reject

the bid offered by Telecom Response, Inc. (TELECOM or TRI), the

low bidder by price discount, was contrary to the Department's

governing statutes, rules, policies, or the ITB? Further, whether

the Department's proposed action was clearly erroneous, contrary

to competition, arbitrary, or capricious? See Section 120.57(3),

Florida Statutes.

PRELIMINARY STATEMENT

TRI and FREBON and other vendors submitted responses to the

ITB. When the Department determined to disqualify TRI from

participation in the bid process, TRI opposed that decision by

filing a notice of protest followed by a formal written protest.

The parties were unable to resolve the protest by mutual

agreement. See Section 120.57(3)(d)1., Florida Statutes. As a

consequence, the case was forwarded to the Division of

Administrative Hearings for conduct of a final hearing in

accordance with Section 120.57(1), Florida Statutes, to resolve

disputed issues of material fact. See Section 120.57(3)(d)3.,

Florida Statutes.

After the protest was filed by TRI, and unbeknown to TRI at

the time, the Department re-reviewed the bids submitted by FREBON,

Global Communications Technologies, Inc. (GLOBAL), and Digital

Video Systems a Division of NuPhase Electronics, Inc. ( DIGITAL )--

the other vendors proposing to offer Tandberg Inc.'s (Tandberg)

video teleconferencing systems and equipment. On August 1, 2000,

the Department posted a second bid tabulation sheet. The

Department rejected DIGITAL 's bid because DIGITAL supplied

multiple discounts within the same Tandberg product line.

Material here, the GLOBAL and DIGITAL bids were rejected because

they did not supply the complete, unaltered manufacturer's

(Tandberg) list price sheet with the bids. This was the same

reason given by the Department for initially rejecting TRI's bid.

The Department again noticed an intent to award the contract

to FREBON for the Tandberg line of video teleconferencing systems

and equipment.

On or about September 7, 2000, TRI filed a Motion for Leave

to Supplement the Formal Written Protest and represented that it

was unaware of the Department's second posting. TRI requested to

present evidence regarding the Department's re-review of the bids

and the second posting.

On the first day of the final hearing, after hearing argument

of counsel, TRI's Motion was granted to the extent that TRI was

permitted to offer evidence regarding the facts and circumstances

surrounding the second posting because the parties disputed

whether the second posting was related to the first posting.

There was no formal challenge to the second posting pursuant to

Section 120.57(3)(b), Florida Statutes.

At hearing, TRI presented the testimony of Mr. Kris Brown,

Mr. Chuck Williams, Ms. Charlotte Brock, and Mr. Bobby Hinson.

TRI's Exhibits 1-6, 8-11, 13-14, 16-18, and 20-21, including the

deposition transcripts of Mr. Hinson, Mr. H. P. "Buddy" Barker

Jr., and Mr. Richard Grace, were admitted. TRI Exhibit 19 was

rejected. The Department's objections made during the depositions

were overruled. The Department presented the testimony of Mr.

Hinson, Mr. Barker, Mr. Steve Welsh, and Mr. Kenneth Gay. The

Department's Exhibits 1-5 were admitted.

The hearing Transcript was filed on October 26, 2000. After

requesting an eight-day extension of time, the parties timely

submitted proposed recommended orders which have been considered

in preparing this Recommended Order.

FINDINGS OF FACT

The ITB

1. During the spring of this year, the Department developed

an ITB for video teleconferencing equipment and video bridging

equipment for all State of Florida agencies and other eligible

users. Department staff developed the specifications for the

ITB. The ITB was a revision of the existing contract held by

TRI, which expired on August 20, 2000, rather than a new

contract. During the ITB/specifications review process, a new

condition was added to require vendors to give a percentage

discount from a list price to aid users in getting more choices

and complete systems.

2. On May 9, 2000, the Department advertised ITB 33-840-

980-E actively soliciting bids. The bid title refers to

" videoteleconferencing equipment." Vendors were notified that

bids would be opened on June 14, 2000, at 2:00 p.m. and that the

bid tabulations would be posted on July 20, 2000.

3. The ITB contains two (2) pages of general conditions

which are used in most if not all Department ITB solicitations.

The ITB also contains special conditions which, among other

things, provide for the "purpose" and "scope" of the bid.

4. "The purpose of this bid is to establish a 12-month

contract for the purchase of Video Teleconferencing Equipment &

Video Bridging Equipment by all State of Florida agencies and

other eligible users in accordance with the Eligible Users

paragraph, General Conditions." (emphasis added).

5. Under the "scope" section, the Department provided:

The objective of this Invitation To Bid (ITB)

is to establish a contract for the purchase,

installation and a maintenance of video

teleconferencing systems and bridging

equipment. The prospective bidder must offer

the complete line of videoconferencing

products and/or video bridge products to

configure desktop and/or room

videoconferencing systems, for each

manufacturer bid. In addition the bidder

must provide replacement parts as needed for

repairs. In accommodating the specific

agencies needs for auxiliary hardware

necessary to make the videoconferencing

equipment and video bridges operationally

complete, the bidder must also provide and

support the Optional Bid Items as shown in

the Price Sheets section of this bid. (bold

emphasis in original).

This section requires the bidder to offer the complete line of a

manufacturer's products to configure desktop and/or room

videoconferencing systems for each manufacturer bid, and to

further provide optional equipment by brand name, which could

include more than one manufacturer.

6. The "prices" section of the ITB also states:

[p] rices shall be submitted in the form of a

percentage(%) discount off manufacturer's

current published price list. Only a single

discount may be offered for each category.

List Prices & percentage discount will remain

firm for the entire contract period.

Discounted prices shall be firm net delivered

price to ordering agency. A copy of the

Manufacturer's unaltered list price sheet as

originally published, in general distribution

and in effect on the date of bid opening must

be submitted with the bid. Failure to

include this with bid package will result in

rejection of bid. (bold emphasis in

original).

7. The "evaluation/award" special condition provides:

"Award shall be by manufacturer's products , based on the highest

discount given from the manufacturer's list price sheet for each

item , on a multiple award basis. If the same manufacturer's

brand is bid by more than one bidder, only the bid with the

highest discount percentage shall be considered for an award.

All other provisions of Awards Paragraph, General Conditions,

shall prevail." (emphasis added). Compare with Findings of Fact

12.

8. The Department also provided several specific

specifications for video teleconferencing equipment. Subsection

1.1 provides that the specifications were specifically written

for two (2) categories of equipment: "(1) Videoconferencing

Systems (includes Set-top, Desktop & Room Systems) (2) Video

Bridging Systems." There were two types of commodities listed,

i.e. videoconferencing equipment and video bridging equipment,

types 1 and 2, respectively. Vendors, including TRI, understood

that they could bid on either type or both at their choosing.

9. The Department offered detailed specifications for the

videoconferencing systems, category one. Specification 3.1.1

deals with "completeness of systems" and provides for room, set-

top, and desktop systems. No other systems are discussed in the

ITB. "A typical room system would include the codec, monitor(s),

rollabout cart, and control unit." "A typical set-top system

would include an integrated codec/camera unit; an external

microphone pickup, and a control unit." A desktop system would

"minimally include the PC codec card, a desktop video camera, a

microphone/headset, and all associated cables for network

connections & required peripherals." The remaining

specifications, Sections 3.1.2 through 3.1.12.8, provide

additional requirements for the room, set-top and desktop

systems.

10. Specification 3.3 provides for "optional bid items"

which

are provided for the convenience and benefit

of the contract users as well as the awarded

vendors. The optional bid items allow the

purchaser a 'one-stop' procurement mechanism,

as well as facilitating the ability of a

contractor to provide a 'complete system' for

the purchaser. It is incumbent on the

purchaser to 'shop' the contract and purchase

products that meet their needs at the lowest

net delivered costs. The optional bid items

shall never exceed the manufacturer's

suggested list price ( MSRP). Vendors must

list all options to the contract that are to

be offered as indicated on the attached bid

sheets. The list must describe the item

brand name/manufacturer, model number, and

the net prices (see optional bid items price

sheets).

11. These "optional bid items" are products, which are not

subject to the discount referred to in the "prices" or

"evaluation/award" sections of the ITB.

12. The ITB contains a price sheet for "videoconferencing

systems" which, among other things, requires the vendor to

provide the manufacturer's name bid, brand name bid, and the

discount to be used with the manufacturer's price list. The

price sheet has a "note" which provided: " Percentage discount

applies to the entire manufacturer's line of videoconferencing

equipment ." (emphasis added).

13. Immediately following the price sheet, the Department

provided the vendor with a sheet to be used for "optional bid

items" which required an item description, brand name, model

number, and net price to be filled in by the vendor. The ITB

does not require the vendor to apply the discount to the optional

items.

14. The ITB also contains a "manufacturer's certificate."

A "special condition" provided: "A ll bids submitted, must include

a certification executed by the manufacturer, stating that the

bidder is an authorized dealer/representative of the

manufacturer. Manufacturers must complete this form even if they

own their own equipment. Dealer agreements shall not be accepted

in lieu of manufacturer certification. Bids requiring

manufacturer certification will not be considered if

certification is not submitted with the bid." (bold emphasis in

original). The certificate provided a "NOTE" which stated:

" THIS MUST BE EXECUTED BY THE MANUFACTURER.

DEALERS/REPRESENTATIVES ARE NOT AUTHORIZED TO SIGN THE

CERTIFICATION FORM ON BEHALF OF THE MANUFACTURER. THIS

CERTIFICATION MUST BE EXECUTED BY THE MANUFACTURER EVEN IF THEY

ARE BIDDING THEIR OWN EQUIPMENT. FAILURE TO SUBMIT THIS

CERTIFICATION WITH YOUR BID SHALL RESULT IN DISQUALIFICATION OF

BID. " The manufacturer certifies that the vendor is authorized

to represent the manufacturer in the State of Florida.

15. TRI did not believe the ITB, including the

specifications and conditions, were unreasonable. There was no

challenge to the ITB.

TRI Inquiry

16. On May 31, 2000, at the request of Mr. Brown of TRI,

Ms. Brock of TRI, asked Mr. Hinson whether bidders were required

to submit a bid response for categories one and two, mentioned

above. Mr. Hinson advised her that a vendor could bid on either

category.

17. On June 12, 2000, and less than ten (10) days before

the bid opening, Ms. Brock asked Mr. Hinson to clarify whether

the Department was asking for a single or multiple discount, as

to the set-top, desktop, and room teleconferencing systems.

However, the general conditions of the ITB, paragraph 7,

interpretations/deputes, provides that "[a] ny questions

concerning conditions and specifications shall be directed in

writing to this office for receipt no later than ten (10) days

prior to the bid opening." This letter was untimely submitted

pursuant to paragraph 7.

The Department's Interpretation of the ITB

18. Mr. Steve Welsh is an engineer. He received a Bachelor

of Science degree in electrical engineering and a Master of

Science degree in civil engineering. He has been employed by the

Department's state technology office two and one-half years. He

is not an expert in videoconferencing systems and this ITB was

his first exposure to video teleconferencing systems.

19. Mr. Hinson has been a purchasing specialist with the

Department for more than five (5) years. He currently

administers twelve (12) to thirteen (13) state contracts

including the State's existing video teleconferencing contract

with TRI.

20. Mr. Welsh drafted the technical specifications for the

videoconferencing equipment or systems in the ITB, including

pages eleven (11) through seventeen (17), excluding Section 3.3,

Optional Bid Items, which were prepared by Mr. Hinson. Mr. Welsh

also drafted pages nineteen (19)(price sheet) and twenty

(20)(optional bid items), with Mr. Hinson. Pages twenty-one (21)

through twenty-seven (27) are standard forms.

21. Set-tops, desktops, and room systems are three (3)

generic types of videoconferencing systems. The definitions of

these systems were general. Mr. Welsh was unaware of any

industry standard regarding desktop, set-top, and room systems.

The specifications required each vendor to offer a complete line

of the manufacturer's videoconferencing equipment and systems,

which might be included under these categories. The Department

intended that the percentage discount apply to the complete

manufacturer's line of videoconferencing equipment. Conversely,

a vendor's offer of a manufacturer's partial line of equipment

under "optional bid items" would be inconsistent with the

objective of the "scope" section of the ITB.

22. In general terms, Mr. Welsh knew that state agencies

have differing needs for videoconferencing equipment and systems

to communicate more effectively. However, he was able to give

only one example; he knew that community colleges were looking

for videoconferencing equipment for distance learning-type needs.

Nevertheless, it was important for each vendor to offer a

manufacturer's pre-configured or packaged systems, or configured

systems from components and prices as the customer needed, or

both.

23. The ITB was not written to specifically address health

care systems. Mr. Welsh did not consider certain industry

specialties, such as education and health care systems, when he

drafted the specifications, and there are no specifications

expressly relating to videoconferencing products for use in

educational or health care settings nor any mention of education

or health care systems. However, it was his intent to draft

flexible and wide-open specifications, so there may have been

several types of industry specialties that he did not consider.

24. The eligible users of this contract include any state,

city, or county government, community and state universities,

private colleges and universities, and any federal agency located

within the State of Florida.

25. The Department intended to award one contract with

multiple manufacturers. The vendor could bid either category of

equipment. The contract would be awarded to the vendor giving

the highest discount for a particular manufacturer's products

within each category.

26. If a vendor did not offer a complete line of the

manufacturer's products, the vendor could offer a greater

discount and achieve a competitive advantage over other vendors

who may have provided a more complete list. It was important to

the Department to be able to compare each vendor's manufacturer's

price list and then apply the vendor's discount in order to

appropriately compare their bids. The Department was unable to

compare TRI's bid because it submitted a discount for only one

(1) page of Tandberg products versus the twenty-two (22) pages of

discounted products offered by FREBON.

27. Mr. Hinson explained that Tandberg's complete

manufacturer's list price must consist of all items offered by

Tandberg. However, Mr. Hinson did not know of the complete line

of Tandberg video teleconferencing equipment and/or bridging

equipment.

28. The Department interprets the word "includes," which

appears on TRI Exhibit 1, page 11, paragraph 1.1(1) of the

specifications, to mean that desktop, set-top, and room systems

could be included as part of a manufacturer's product line.

However, it was not meant to be exclusive.

29. The Department asserts that TRI's bid was non-

responsive because TRI did not submit a complete, unaltered price

list for all of Tandberg's video telecommunication products at a

discount. TRI would have been awarded the contract for the

Tandberg products if the bid had been responsive.

30. On the other hand, the Department contends that

FREBON's bid, containing approximately twenty-two (22) pages

seemed complete and appeared to have included a complete line of

Tandberg products. But, like TRI, GLOBAL's bid containing eight

(8) pages, and DIGITAL's bid containing twelve (12) pages of

discounted Tandberg products, were likewise non-responsive for

being incomplete.

31. TRI's one-page price list would not have been complete,

in the Department's view, even if TRI had submitted a complete

line of Tandberg products in the options portion of TRI's bid

because TRI did not offer the discount for the options.

32. Mr. Buddy Barker explained that a minor irregularity is

a deviation from a specification which does not affect price and

does not give one vendor a competitive advantage over another.

He did not consider TRI's omission of other Tandberg's products

to be a minor irregularity.

The Tandberg Products

33. There appears to be a major distinction between

Tandberg videoconferencing systems, such as desktops, set-tops,

and room systems, and Tandberg special "Application" products,

such as health care and education products, in both appearance

and functionality.

34. Mr. Richard Grace is an Executive Vice President

employed by the Applications Group at Tandberg, Inc.

35. The term "Applications" within Tandberg, Inc. refers to

market segments within their business. In this case,

"Applications" pertains to distance education and health care

products.

36. During his deposition, admitted over objection as TRI

Exhibit 18, Mr. Grace reviewed several documents, which were

identified as DMS 0001, DMS 0006-0027, DMS 0029, and a memorandum

dated June 9, 2000. These DMS numbered documents appear in TRI

Exhibit 5. The DMS labeled documents were submitted with

FREBON's bid.

37. DMS 0006-0027 is the price list for the "Business

Solutions" products manufactured by Tandberg, as well as the

maintenance costs for various products, and also include the

Tandberg health care and education products. These documents

include the entire product lines price list for Tandberg's

"Business Solutions" and "Applications" products.

38. DMS 0006 is the first page from FREBON's bid and lists

the "systems" products from Tandberg's "vision products price

list." Tandberg's "vision products" are considered Tandberg

"Business Solution" products, i.e ., standard CODEC's or what

Tandberg refers to as "off-the-shelf roll- abouts or set-top

boxes." Off the shelf products are standard video conferencing

systems that Tandberg designs and sells. They are also called

roll- abouts, set-tops, and CODEC's.

39. According to Mr. Grace, the Department's ITB asked

vendors to offer to bid, material here, Tandberg's "Business

Solutions" systems products. Mr. Grace said that Tandberg

"education" and "health care" products would be considered room

systems, but "the nature of the bid was looking for a more

traditional answer of roll- abouts, which are administrative-type

devises," and the "roll- abouts" are the systems referenced on TRI

Exhibit 5, DMS 0006 and 0007, above the line, "Tandberg

Educator," which were offered by TRI and FREBON.

40. The products listed on TRI Exhibit 5, DMS 0006 to DMS

0007, above the notation "Tandberg Educator," are the

videoconferencing systems manufactured and sold by Tandberg and,

from a systems standpoint , are all of the "Business Solutions"

products sold by Tandberg. The "systems" listed on these pages,

(TRI Exhibit 5, DMS 0006 and the top of DMS 0007), include the

only desktop, set-top, and room systems manufactured by Tandberg.

Except for the omission of three (3) portable products listed in

TRI Exhibit 5, DMS 0006 and 0007, of the FREBON bid, TRI's

Tandberg "vision product price list" contained the same "systems"

products as in FREBON's bid. (TRI Exhibit 2, BID 0033). The

portables listed in FREBON's bid at DMS 0007, are not desktop,

set-top, or room systems.

41. TRI Exhibit 5, DMS 0007 through DMS 0013, lists

accessories and optional items that can be attached to

videoconferencing systems. DMS 0014 through DMS 0017, appear to

be the maintenance pricing for the "Business Solution" products.

DMS 0018 and 0019 refer to the "Application" products for

Tandberg. DMS 0020 through DMS 0023 refer to the maintenance and

service prices for the "Application"-based products, such as

education systems, tutor products, and health care systems.

Currently, Tandberg only focuses on the education and health care

systems as part of its "Application" products. DMS 0024 through

DMS 0027 are fees for the installation and on-site support for

the Tandberg system throughout the world.

42. Tandberg only manufactures the products listed on TRI

Exhibit 5, DMS 0006-0027. However, Tandberg sells, but does not

manufacture, other products such as "accord bridges," which are

not included on these DMS pages.

The Bids

TRI

43. TRI has been selling Tandberg video teleconferencing

systems since February of 1998. TRI currently has the contract

with the State of Florida for video teleconferencing equipment.

44. TRI submitted a pricing sheet for videoconferencing

systems and, in part, proposed to offer a 29.4 percent discount

for "Tandberg Vision Business Solution Systems," the brand name

for the bid. The discount applied to the "systems" products

listed in the one-page, April 1, 2000, Tandberg price list.

45. TRI's one-page price list, (TRI Exhibit 2, BID 0033),

is the same as the first page of FREBON's Tandberg price list.

(TRI Exhibit 5, DMS 0006). However, the second page of FREBON's

price list (TRI Exhibit 5, DMS 0007), includes three (3) portable

products which were included with the FREBON bid, but not

included in the TRI bid. TRI felt that portables were not

desktop, set-top, or room systems. Further, the products listed

on TRI Exhibit 5, DMS pages 0007 (after the "portables" section)

through DMS 0027, included by FREBON, were not included by TRI

because they are not desktop, set-top, or room systems.

46. TRI defines video teleconferencing systems to include

only desktop, set-top, and room systems. Also, the terms

videoconferencing systems and equipment are used interchangeably.

Accordingly, TRI, consistent with its understanding of the

Department's ITB, submitted a one-page price list for Tandberg

desktop, set-top, and room system products.

47. Having reviewed the ITB, TRI thought the Department, in

requesting bids for video teleconferencing systems, was

requesting a manufacturer's, here Tandberg's desktop, set-top,

and room "systems" products only, and not the manufacturers, here

Tandberg's, special "Application" products.

48. TRI also offered a price list for optional items, which

were accessories that could be attached and used as part of a

system, with brand names including, but not limited, to

Panasonic, Tandberg, and ELMO. TRI also provided a price

schedule, 4.1.00, Exhibit A, which provided net prices for

described systems, portables, CODEC's, for example. TRI's 29.4

percent discount does not apply to these items.

FREBON, GLOBAL , and DIGITAL

49. Three other vendors submitted bids offering discounts

for the Tandberg line of video teleconferencing equipment.

FREBON offered a 22.3 percent discount off Tandberg's price list

consisting of twenty-two (22) pages of Tandberg products. Page

one of FREBON's submission (TRI Exhibit 5, DMS 0006), provides

the same information set forth in TRI's one (1) page price list,

Exhibit B (TRI Exhibit 2, BID 0033). The remaining pages (TRI

Exhibit 5, DMS 0007-DMS 00027), were not provided by TRI.

50. GLOBAL offered a 21 percent discount off of Tandberg's

price list for eight (8) pages of Tandberg products. (TRI

Exhibit 5, DMS 0031-0038). DMS 0031-0032 provide the same

information as TRI's price list, although GLOBAL adds three (3)

products under the heading "portables," which are omitted from

the TRI price sheet.

51. DIGITAL also submitted a bid for video teleconferencing

equipment offering the Tandberg line of products. However,

DIGITAL offered multiple discounts. DIGITAL provided twelve (12)

pages of Tandberg products.

The Initial Bid Tabulation Posting

52. On July 20, 2000, the Department posted the initial bid

tabulation form for the video teleconferencing equipment. TRI

received a copy of the bid tabulation.

53. DIGITAL'S bid was deemed non-responsive because DIGITAL

offered multiple discounts within the same product line, whereas

the bid called for a single discount. The Department accepted

the GLOBAL and FREBON bids. The Department rejected TRI's bid

with a discount of 29.4 percent because TRI did not supply, at a

discount, the complete, unaltered manufacturer's (Tandberg) price

list with the bid offering all of the videoconferencing equipment

and products manufactured by Tandberg, i.e ., the twenty-two (22)

pages offered by FREBON. This was the sole reason given by the

Department for finding TRI's bid to be non-responsive. TRI's bid

complied with all the other technical requirements required of

the ITB.

54. TRI filed a timely notice of protest, followed by a

formal petition, challenging the Department's intended action to

award the bid the FREBON and finding TRI's bid non-responsive.

The Second Bid Tabulation Posting

55. Unknown to TRI, on August 1, 2000, the Department

posted a second bid tabulation involving the same bid and the

same vendors. During the interval between the first and the

second postings, the Department re-reviewed the bids. In the

second posting, the Department again noticed its intent to award

the contract to FREBON as an " SBN" i.e. , "single bid negotiated,"

having determined that FREBON was the only responsive bidder.

This was the only factor considered by the Department. In fact,

the Department acknowledged that the products were available from

multiple sources. Also, this bid was not an "exceptional

purchase."

56. Aside from the reference to "single bid negotiated" in

the second tabulation, there is no written explanation for the

Department's decision. See Section 287.057(4), Florida Statutes

(". . . The agency shall document the reasons that such action

[negotiate if less than two responsive bids are received] is in

the best interest of the state in lieu of resoliciting

competitive sealed bids. . . ."); Florida Administrative Code

Rule 60A-1.002(5)(requiring, in part, the agency to document the

conditions and circumstances when less than two (2) responsive

bids are received).

57. The Department changed its mind about the

responsiveness of the GLOBAL bid and found GLOBAL's bid to be

non-responsive on the ground that GLOBAL did not supply the

complete manufacturer's price sheet with the bid. Mr. Hinson

said that DIGITAL's bid was rejected on the same ground, although

there is no documentation to support this testimony.

58. The Department did not furnish TRI with a copy of the

second posting nor notify TRI of the posting because the

Department felt, pursuant to an unwritten policy, that TRI was

not adversely affected by the decision, because the Department

previously found TRI's bid non-responsive. FREBON and GLOBAL

were notified of the second posting pursuant to the same policy.

Resolution of the Conflict Between TRI and the Department

59. It is undisputed that FREBON offered a discount for the

entire product line price list for all of the "Business

Solutions" and "Applications" products manufactured by Tandberg.

The price lists include, among other products, Tandberg health

care and education products. Conversely, TRI offered a discount

based on a complete, unaltered price list for all of the

videoconferencing systems manufactured by Tandberg, and, from a

systems standpoint, all of the "Business Solutions" products sold

by Tandberg. Specifically, TRI offered a discount for all of the

desktop, set-top, and room systems manufactured by Tandberg.

60. The resolution of this matter is not without some

difficulty. We have heard from only one (1) vendor, TRI. All of

the vendors offered different discounts for various products

manufactured by Tandberg and no two vendors furnished the same

Tandberg price list for the same products, although there was

some overlap among the vendors. Yet no one, including TRI and

the Department, suggests that the ITB was ambiguous or not

clearly understood. Nonetheless, the ITB is not a model of

clarity and, on this record, the ITB did not convey the intent of

the Department expressed during the hearing.

61. Notwithstanding the Department's expression of intent

articulated during the final hearing, a plain reading of the

entire ITB leads to several conflicting conclusions. The stated

material objective of the ITB is to establish a contract for the

purchase, installation, and maintenance of video teleconferencing

systems, not video teleconferencing equipment, although the bid

title says otherwise, and the purpose of the bid is to establish

a contract for the purchase of video teleconferencing equipment.

Another objective required each vendor to offer the complete line

of videoconferencing products to configure desktop and/or room

videoconferencing systems.

62. Further, each vendor was required to offer a percentage

discount for the entire Tandberg line of videoconferencing

equipment. Stated differently within the ITB, the award is made

by manufacturer's products, based on the highest discount given

from the manufacturer's list price sheet for each item. But

which item?

63. The terms "videoconferencing systems" and

"videoconferencing equipment" are used interchangeably in the

ITB. The specifications were written specifically for two (2)

categories of equipment, material here, videoconferencing

systems, which include, set-top, desktop, and room systems, the

only "systems" discussed within the four (4) corners of the ITB.

The "systems" products offered by TRI, for a discount, are the

only desktop, set-top, and room systems manufactured by Tandberg,

and, from a systems standpoint, are the only videoconferencing

systems that Tandberg manufactures. Thus, it follows that TRI

provided the Department with a discount for the complete,

unaltered list price sheet for these Tandberg products.

64. While a decision to award the contract to TRI is

contrary to the Department's intent expressed in the final

hearing through its representatives, it is consistent with the

ITB.

The Manufacturer's Certificate

65. A special condition of the ITB required each bidder to

furnish a manufacturer's certificate, which certifies that a

bidder is authorized to sell the manufacturer's equipment in the

State of Florida.

66. Mr. Hinson was advised by Mr. Grace of Tandberg that as

of June 14, 2000, FREBON was authorized to sell and service

Tandberg "Application" products, i.e. , Tandberg's health care and

education series products, only to the federal government in the

State of Florida, and not to state governments, including the

State of Florida. However, the Department accepted FREBON's

certificate based solely on the representations made by Tandberg

regarding FREBON's authorization.

67. The Department feels it is unnecessary to investigate

the veracity of a manufacturer's certificate because the

Department can pursue a remedy against the vendor, here FREBON,

if the vendor is not authorized after the contract is awarded.

68. When he signed the manufacturer's certificates for the

three (3) vendors, including FREBON, Mr. Grace meant the vendors

were authorized resellers of Tandberg's products.

69. Mr. Grace sent a memorandum of June 9, 2000, to any

vendor who sent him the State of Florida's manufacturer's

certificate for signature authorizing them to participate in the

bid. Mr. Grace explained in his memorandum and during

deposition, that authorization to act as an "Applications" dealer

did not allow the vendor to sell "Business Solutions" products

and vice-versa. For example, FREBON was limited to selling the

Tandberg "Business Solution" products to the State of Florida and

could not sell the Tandberg health care and intern products or

education and tutor products to the State of Florida.

70. Tandberg is in the process of discussing with FREBON

to expand their capabilities of selling the "Application"

products. Mr. Grace would discuss additional authorization with

any vendor who wins the bid.

71. Mr. Grace received and signed manufacturer's

certificates for TRI, FREBON, and DIGITAL, because they were

"authorized resellers of Tandberg's product that was being asked

for in the statement of the work," i.e. , for the "Business

Solution" products that, in his judgment, the Department was

requesting in the bid, and he "would sign them again under that"

premise.

72. TRI and DIGITAL are authorized to sell Tandberg's

"Business Solution" and "Applications" products to the State of

Florida.

CONCLUSIONS OF LAW

73. The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding and of

the parties thereto pursuant to Sections 120.569, 120.57(1), and

120.57(3), Florida Statutes.

74. In addition to the provisions set forth in the ITB that

are described in the Findings of Fact, certain statutes and rules

are relevant in examining the proposed agency action by the

Department.

75. The Legislature provided its intent regarding the

procurement of goods and services by state agencies in Section

287.001, Florida Statutes, as follows:

The Legislature recognizes that fair and open

competition is a basic tenet of public

procurement; that such competition reduces

the appearance and opportunity for favoritism

and inspires public confidence that contracts

are awarded equitably and economically; and

that documentation of the acts taken and

effective monitoring mechanisms are important

means of curbing any improprieties and

establishing public confidence in the process

by which commodities and contractual services

are procured. It is essential to the

effective and ethical procurement of

commodities and contractual services that

there be a system of uniform procedures to be

utilized by state agencies in managing and

procuring commodities and contractual

services; that detailed justification of

agency decisions in the procurement of

commodities and contractual services be

maintained; and that adherence by the agency

and the contractor to specific ethical

considerations be required.

76. Section 287.012, Florida Statutes, provides definitions

in reference to competitive bidding. "'Competitive sealed

proposals' refers to the receipt of two or more sealed bids or

proposals submitted by responsive and qualified bidders or

offerors." Section 287.012 (5), Florida Statutes. "'Qualified

bidder,' 'responsible bidder,' 'qualified offeror,' or

'responsible offeror' means a person who has the capability in

all respects to perform fully the contract requirements and has

the integrity and reliability which will assure good faith

performance." Section 287.012 (13), Florida Statutes.

"'Responsive bid' or 'responsive proposal' means a bid or

proposal submitted by a responsive, and responsible or qualified,

bidder or offeror which conforms in all material respects to the

invitation to bid or request for proposals." Section 287.012

(16), Florida Statutes. "'Responsive bidder' or 'responsive

offeror' means a person who has submitted a bid or proposal which

conforms in all material respects to the invitation to bid or

request for proposal." Section 287.012 (17), Florida Statutes.

77. The Department, in exercising its contracting

authority, "reserve[s] the right to reject any or all bids or

negotiations or proposals. . . ." Florida Administrative Code

Rule 60A-1.002 (9). The Department also "reserve[s] the right to

waive any minor irregularities in an otherwise valid bid or

proposal or offer to negotiate. Variations which are not minor

cannot be waived." Florida Administrative Code Rule 60A-1.002

(10). A "minor irregularity" is "[a] variation from the

invitation to bid or invitation to negotiate or request for

proposal terms and conditions which do not affect the price of

the commodities or services, or give the bidder or offeror an

advantage or benefit not enjoyed by other bidders or offerors,

and does not adversely impact the interests of the agency."

Florida Administrative Code Rule 60A-1.002 (17) (emphasis added).

See also Harry Pepper & Associates, Inc. v. City of Cape Coral ,

352 So. 2d 1190, 1193 (Fla. 2d DCA 1977).

78. Section 120.57(3)(f) provides in pertinent part:

In a competitive procurement protest, other

than a rejection of all bids, the

administrative law judge shall conduct a de

novo proceeding to determine whether the

agency's proposed action is contrary to the

agency's governing statutes, the agency's

rules or policies, or to the bid

specifications. The standard of proof for

such proceedings shall be whether the

proposed agency action was clearly erroneous,

contrary to competition, arbitrary, or

capricious. . . .

79. "A capricious action is one taken without thought or

reason or irrationally. An arbitrary decision is one not

supported by facts or logic." Agrico Chemical Co. v. Department

of Environmental Regulation , 365 So. 2d 759, 763 (Fla. 1st DCA

1978). The inquiry to be made in determining whether an agency

has acted in an arbitrary or capricious manner involves

consideration of "whether the agency: (1) has considered all

relevant factors; (2) has given actual, good faith consideration

to those factors; and (3) has used reason rather than whim to

progress from consideration of these factors to its final

decision." Adam Smith Enterprises v. Department of Environmental

Regulation , 553 So. 2d 1260, 1273 (Fla. 1st DCA 1989).

80. Because TRI has challenged the Department's decision to

award the contract at issue herein to FREBON, it has the burden

of proving "a ground for invalidating the award." State

Contracting and Engineering Corp. v. Department of

Transportation , 709 So. 2d 607, 609 (Fla. 1st DCA 1998); Section

120.57(3)(f), Florida Statutes ("Unless otherwise provided by

statute, the burden of proof shall rest with the party protesting

the proposed agency action."). Because there is no statute

providing otherwise, the Findings of Fact in this proceeding

"shall be based upon a preponderance of the evidence." Section

120.57(1)(h), Florida Statutes.

81. TRI, the lowest bidder (by percentage discount) on the

bid, filed a bid protest pursuant to Section 120.57(3)(f),

Florida Statutes, challenging the Department's decision to award

the contract to the second lowest and responsive bidder (by

percentage discount), FREBON.

82. In this case, the Department decided that TRI's

proposal should be rejected as non-responsive, i.e. , TRI's bid

did not include a discount for the complete, unaltered price list

of Tandberg's complete line of video teleconferencing product

equipment/systems. The Department accepted FREBON's bid as the

only responsive bidder, and as a "single bid negotiated."

83. Although the Department may reject a proposal deemed

non-responsive, it may not, consistent with Section 120.57(3)(f),

exercise this discretion in an arbitrary or capricious manner, in

a manner that is clearly erroneous, or in a manner that is

contrary to competition, or in manner that is contrary to the

Department's statutes, rules, policies, or the bid

specifications. The same standard applies given the Department's

decision to award the contract to FREBON.

84. Based on the Findings of Fact, TRI has proven by a

preponderance of the evidence that the Department's decision to

award the contract to FREBON, and not to TRI, is contrary to the

ITB and statutory and rule requirements for responsive and

qualified bidders.

85. Notwithstanding the Department's expression of intent

articulated during the final hearing, a plain reading of the

entire ITB leads to the conclusion that each vendor was required

to offer a percentage discount for the entire Tandberg line of

videoconferencing equipment, or the Tandberg manufactured

videoconferencing systems, which include only the desk top, set-

top, and room systems. These are the only "systems" discussed

within the four (4) corners of the ITB.

86. The "systems" products offered by TRI, for a discount,

are the only desktop, set-top, and room systems manufactured by

Tandberg. Thus, it follows that TRI provided the Department with

the complete, unaltered list price sheet for these Tandberg

products. TRI's bid was responsive to the ITB and should have

been accepted. The Department's decision to reject TRI's bid is

contrary to the ITB and is clearly erroneous.

87. Further, the ITB required each vendor to submit a

certification executed by the manufacturer, "stating that the

bidder is an authorized dealer/representative of the

manufacturer." FREBON submitted a certificate signed by Mr.

Grace of Tandberg attesting to FREBON's authorization to

represent Tandberg in the State of Florida. However, as of

June 14, 2000, the bid submission date, FREBON was authorized to

sell Tandberg "Application" products, i.e., Tandberg's health

care and education products, solely to the federal government in

the State of Florida, not to the State of Florida.

88. The Department emphatically says that the ITB required

FREBON to offer the Tandberg products to the State of Florida, if

awarded the contract, and the evidence indicates that Tandberg is

amenable to considering authorizing FREBON to sell additional

products to the State of Florida. The Department's

interpretation of the ITB is not unreasonable. FREBON submitted

the required manufacturer's certificate and complied with letter

of the ITB.

89. Finally, after the initial bid tabulation posting, the

Department re-reviewed the bids and ultimately concluded that

FREBON should be awarded the contract as a "single bid

negotiated." The Department did not document its decision to

award FREBON the contract as required by Section 287.057(4),

Florida Statutes, and Department rules, i.e. , the Department did

not "document the reasons that such action is in the best

interest of the state in lieu of resoliciting competitive sealed

bids. . . ."

90. The Department did not afford notice to TRI of the

second posting. Although the Department initially rejected TRI's

bid, TRI was nonetheless adversely affected by this decision.

TRI's protest was pending at the time and FREBON's bid in

question.

91. The re-review process, and second posting, was a

continuation of the Department's initial decision. The

Department was required to give TRI notice of a clear point of

entry to challenge this decision.

92. The facts and circumstances of the re-review and second

posting are relevant and material to the disposition of this case

because the process involved a review of the same bids and

vendors. No additional facts were considered. Resolution of

this issue in this case is necessary because it bears on the

Department's ultimate decision whether to award the contract to

FREBON. The Department's second posting and decision to award

the contract to FREBON as a "single bid negotiated" is contrary

to law and clearly erroneous, and should be rejected.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that the Department of Management Services enter

a final order and award the contract to TRI because TRI offered

the lowest discount for the required Tandberg products. If the

Department declines to award the contract to TRI, it is further

recommended that the Department re-bid the contract because an

award to FREBON cannot be justified as a "single bid negotiated."

DONE AND ENTERED this 14th day of December, 2000, in

Tallahassee, Leon County, Florida.

___________________________________

CHARLES A. STAMPELOS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 14th day of December, 2000.

COPIES FURNISHED:

F. Alan Cummings, Esquire

Daniel Te Young, Esquire

Cummings & Thomas, P.A.

1004 DeSoto Park Drive

Post Office Box 589

Tallahassee, Florida 32302-0589

Terry A. Stepp, Esquire

Department of Management Services

4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950

Cynthia Henderson, Secretary

Department of Management Services

4050 Esplanade Way

Tallahassee, Florida 32399-0950

Bruce Hoffmann, General Counsel

Department of Management Services

4050 Esplanade Way

Tallahassee, Florida 32399-0950

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

ten (10) days from the date of this Recommended Order. Any

exceptions to this Recommended Order should be filed with the

agency that will issue the Final Order in this case.